Monthly Archives: April 2017

Investing, Personal Finance Basic , , , , Leave a comment

Investing: it’s only getting easier

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I think the hardest part of investing is the beginning. When you are starting out, the return on investment seems minimal (unless you start out with 50k+ lump sum). I started my investment with $500 each in Smartshare and Superlife. I remember the first couple months, returns are under $10 and I lose money in some months as well. However, as I slowly build up my investment by monthly contribution and reinvest my returns, the returns are getting better over time. My portfolio passes its milestone with less and less time. Investing is getting easier
Here is a simulation for someone who investing into a growth asset with $500 a month. The average annual return is 7% and the goal is to reach $100,000. It took 11 years and 2 months to reach 100K
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If you break down the investment by $10,000 block and measure the months it took to reach each one of them, it took less and less time.
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The first $10,000 took you 20 months and the last $10,000 only took you 9 months. It’s just getting easier.
Also, around the 10th year mark, the monthly return on investment actually is more than your $500 monthly contribution.
Overall, you’ve only contributed $66,500. The rest came from the return of your investment. investment easy 3.png
You may think you only got a tiny amount right now, it won’t make a difference. From our example, the first $500 contribution turns into $1,226 at the end. That small $500 contribution is only 0.75% of your total contribution. However, with the power of reinvesting, continues contribution and compounding interest, the return on that first $500 represent 1.23% on the $100,000. So if you haven’t started your investment, start now! That small initial investment could be your biggest return. If you already started, the hardest part is already over, just enjoy the downhill ride.
Also, don’t be afraid to aim for a big number. The path to get there is a lot shorter than you think. Currently, I am only 5% on my investment goal, but I know the hardest 5% is over. Investing, it’s only getting easier.
ETF, Index Fund, Investing, Personal Finance Basic , , , , , , , , , , Leave a comment

Cheapest Way to buy and hold NZ Top 50 ETF

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I always encourage people to start a small investment with NZ Top 50 ETF and US 500 ETF when they are starting out. Those two ETFs are easy to understand, diversified, low-cost and have low minimum investment requirement ($500). They are ideal for long term (7 years+) investment. So here is the cheapest way to buy and hold NZ Top 50 ETF.

I will be discussing average investment here. I do not include KiwiSaver opinion here because you can’t get the money out before 65. (Anyway, ETF still an excellence option for KiwiSaver, especially for anyone aged under 50)

What is NZ Top 50 ETF?

Quote from Smart Shares Web Site:

The NZ Top 50 Fund invests in financial products listed on the NZX Main Board and is designed to track the return on the S&P/NZX 50 Portfolio Index. The S&P/NZX 50 Portfolio Index is made up of 50 of the largest financial products listed on the NZX Main Board. The S&P/NZX 50 Portfolio Index is made up of the same financial products as the S&P/NZX 50 Index, but with a 5% cap on the weight of each product.

So basically when you invest in NZ Top 50, you will have a share in the top 50 companies in NZ stock market.

Stock code for NZ Top 50 ETF is FNZ.NZ

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Where and how to buy?

There are three ways to purchase NZ Top 50 ETF, on the stock market, with investment fund or monthly contribution.

Trade on the stock exchange – NZ Top 50 ETF can be traded as share on stock market via any stock broker. I will be using ANZ Securities online and ASB securities online here as they are amongst the cheapest brokers in New Zealand.

Purchase with Fund – Superlife (Smartshare’s sister company) offer NZ Top 50 ETF fund that holds shares in NZ Top 50 ETF. You can set up an account and purchase those fund with Superlife.

Purchase via monthly contribution – This is the most accessible and fixable way to buy into ETF, both Superlife and Smartshare offer that service. You need set up an account with at least $500 initial investment, and contribution $50 monthly to purchase that ETF or fund.

What’re the fees?

Basically, you should look for the lowest fee when you consider investing into the same product.

ANZ & ASB Securities online: You can purchase FNZ directly on the stock market with ANZ Securities. ANZ cheapest rate is $29.90/trade under $15000. However, you have to be an Online Multi-Currency Account (OMCA) holders with sufficient cleared funds available to fully cover the purchase of securities prior to submission of the order. Otherwise, ANZ charge $29.90 + 0.40% on trade. If you are not an OMCA holder with ANZ, go with ASB Securities, they charge $30 or 0.30% per transactions, whichever higher. On top of that, NZ 50 ETF charge 0.50% p.a. on management fee base on your total holding before they pay out. If you did the calculation, in order to pay the least amount of fees, you should only make one trade a year with over $10000, which will bring the fee% to 0.80%.

Smartshares: You can make lump sum investment and monthly contribution with smartshare. They will charge a one-time $30 account setup fee and charge 0.50% p.a. management fee base on your total holding. Check out the SmartShares disclosure statement here.

Superlife: Same as Smartshare, you can do lump sum investment and monthly contribution. They charge a $12 p.a. administration fee and 0.49% management for NZ 50 Top ETF. Check out Superlife disclosure statement here.

Cheapest Way?

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Smartshares is the cheapest way to buy and hold FNZ. Superlife’s fee will become cheaper once the holding passed 120K.

I personally used both Smartshares and Superlife, and I think Superlife have a much better user interface and app. The $12 admin fee can be shared with other Superlife funds.

So if you just want to buy FNZ, Smartshare is the best deal out there. If you already have other funds with Superlife, there is not much difference in cost between Superlife and SmartShares.

Although ASB and ANZ Securities’ cost are higher, you should open an account with them if you got ETF from SmartShares. Since you are buying actually share of ETF via Smartshare, you will need a stock broker when you need to sell your share.

Email thesmartandlazy@gmail.com or follow me on Twitter @thesmartandlazy if you have any questions.